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All the major fiber vendors had a rough 2023
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It was because their customers had stockpiled supplies
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They didn't want to layoff workers because demand will grow this year
There's this annoying saying from coaches in every sport: "No pain, no gain." But that’s what seems to be going on with the big fiber equipment vendors before they start seeing revenues from Broadband Equity, Access and Deployment (BEAD) funds.
All the major providers of fiber and access components had a painful 2023, including Corning, CommScope, Adtran and Nokia.
“Last year was a very challenging year because we had an inventory work-down year,” said Gary Bolton, president and CEO of the Fiber Broadband Association.
He said that during the Covid years, service providers were “buying up anything they could” and “stockpiling” because of concerns about the supply chain.
“Wall Street had projected that these vendors were on this certain trajectory, and then all the sudden they stopped getting orders,” said Bolton. “That reset Wall Street’s expectations.”
Last year was also a challenging year for broadband vendors because “they know they have all this demand coming, but their factories were quiet last year,” he added. Also, they’re wary about conducting mass layoffs because they anticipate humming factories in the latter half of this year.
The 2023 pain
Last year will be a year many fiber vendors want to forget. For instance, Corning’s full year 2023 sales were $13.6 billion, down 8%. Meanwhile, CommScope’s fourth quarter 2023 was a disaster, with its consolidated revenue plummeting 38% year on year to $1.18 billion.
Adtran’s CEO Tom Stanton stated in the company’s Q4 2023 earnings press release, “Revenues continued to remain challenging due to the macro-economic environment and elevated customer inventories."
Elsewhere, Nokia’s CEO Pekka Lundmark said of the company’s Q4 and full year 2023 results, “We saw a meaningful shift in customer behavior impacting our industry driven by the macro-economic environment and high interest rates along with customer inventory digestion. This led to our full year net sales declining by 8% in constant currency.”
The horizon
But there’s good news on the horizon.
Dell‘Oro is predicting things will pick up for broadband vendors later in the year. And Bolton agrees, saying analysts are predicting strong fiber demand, starting later this year and continuing even beyond the BEAD years.
Rays of sunshine are already starting to poke through. Why else would CommScope announce this week plans to expand production for its fiber-optic connectivity product portfolio to meet expected demand for Build America Buy America (BABA) compliant products?
We'll be watching closely to see how 2024 pans out. Hopefully it won't be another flop.